The 130 Million Yuan Equity Transfer Puzzle: The Cross-Border Litigation Battle Behind a "Simplest

2026/10/14

Agreement in History"

Case Recap: Payment First, Agreement Later — 130 Million Yuan for Nothing

In 2018, Mr. Wang entered into negotiations with Mr. Chen to acquire a 30% equity interest in a Cambodian real estate project held by the latter. Mr. Wang first paid USD 570,000 in cash, then transferred RMB 130 million in successive payments, totaling approximately RMB 134 million. However, it was not until October 2018 that the parties belatedly signed the Equity Transfer Agreement, which contained only nine clauses yet confirmed that "as of the date of signing, Party B has paid in full."

More dramatically still, Mr. Chen not only failed to effect the equity transfer, but also failed to provide monthly financial statements. Upon investigation, Mr. Wang discovered that Mr. Chen had never actually acquired the 30% equity interest in the project at all — the subject matter of the transfer was purely fictitious. Mr. Wang filed suit in indignation, seeking rescission of the agreement, return of the full amount, and a claim that Mr. Chen's son, Xiao Chen, bear joint and several liability — on the ground that part of the funds had been transferred into Xiao Chen's account.

Twists and Turns: Jurisdictional Objection Drags On for a Year and a Half

After being served, Mr. Chen first delayed in collecting the materials, then raised a jurisdictional objection, arguing that the agreement stipulated the application of Cambodian law and that the subject matter was located overseas, and that the case should therefore be transferred or dismissed. His son, meanwhile, avoided answering the court's calls, ultimately necessitating service by public announcement.

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The first-instance court held: an agreement to "apply Cambodian law" does not equate to a choice of Cambodian court jurisdiction; both parties are Chinese nationals, and the defendant's domicile is in Jieyang; accordingly, the Jieyang Intermediate People's Court has jurisdiction. Mr. Chen appealed to the Guangdong High People's Court, which upheld the original ruling. The jurisdictional dispute lasted a year and a half before finally being settled.

Substantive Battle: Applicable Law Becomes the Decisive Factor

At trial, Mr. Chen argued that the parties were engaged in cooperative investment and should share the risks. Counsel astutely pointed out: the agreement expressly transferred a "30% equity interest," not a cooperative development; moreover, Mr. Chen could not prove that he held the equity interest, could not prove that the funds were invested in the project, and failed to perform his financial statement obligations.

The key turning point was this: Mr. Chen did not accept the Cambodian law provided by the plaintiff, yet failed to provide it within the designated time limit; the court accordingly determined that "foreign law could not be ascertained" and proceeded to apply Chinese law. Ultimately, the court ordered rescission of the agreement and the return of RMB 133.99 million plus interest; Xiao Chen, not being a contracting party, was not held jointly and severally liable.

Counsel's Opinions and Recommendations

I. In cross-border transactions, one must "first establish the rules, then discuss the deal." The agreement in this case contained only nine clauses and failed to specify core matters such as the target company, the method of equity transfer, and liability for breach, thereby sowing hidden risks for the dispute. In cross-border equity transfers, the governing law, the court with jurisdiction, the conditions for closing, and remedies for breach should be expressly stipulated.

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II. Jurisdiction and choice of law are two distinct issues. An agreement to apply foreign law does not equate to foreign court jurisdiction. If one wishes to litigate in China, Chinese court jurisdiction should be expressly stipulated; if foreign law is chosen, the legal texts should be ascertained and provided in advance.

III. Evidentiary awareness determines success or failure. In this case, the plaintiff's complete transfer records became the key to establishing the fact of payment; the defendant's failure to provide foreign law within the evidentiary period directly resulted in the application of Chinese law.

IV. The role of counsel is irreplaceable. From identifying the legal relationship and determining the jurisdictional connecting factors, to the ascertainment of foreign law and control of evidentiary deadlines, a professional lawyer can seize both procedural and substantive initiative in complex cross-border litigation, transforming a "seemingly unsolvable" predicament into an enforceable victorious judgment.

Conclusion: In cross-border investment, the agreement is the shield and procedure is the spear. Without rigorous contract design and professional litigation strategy, the 130 million yuan lesson may repeat itself.